Cahn v. Antioch University

Edgar and Jean Cahn (plaintiffs) were appointed co-deans of the Antioch School of Law (the law school) by the president of Antioch University (Antioch) (defendant). The Cahns also acted as faculty members. Three years after their initial appointment, the Cahns were appointed as co-provosts of the law school. Shortly after, Antioch experienced a financial crisis and was unable to pay its payroll and debts, including debts related to the law school. Concerned about the fate of the law school, the law school board of governors passed a resolution directing management to identify financial obligations and take measures to ensure that the obligations were discharged. Antioch, after entertaining the possibility of filing for bankruptcy, imposed austerity measures on its subunits and directed its subunits to transfer all available funds to Antioch’s bank in Ohio. The Cahns hired outside counsel to assess the situation, using law school funds at a total expense of $8,000, without Antioch’s permission. Antioch threatened to terminate the law school after learning that it was not complying with its directive. The law school transferred all of its funds to a bank in Washington, D.C., and continued to explore its options with outside counsel. The law school’s board of governors passed another resolution, authorizing management to do whatever was needed to ensure the viability of the law school and maintain its obligations to students and faculty. After negotiations hit an impasse, the Cahns filed suit against Antioch, which responded by dissolving the law school board of governors and terminating the Cahns. Antioch also filed counterclaims. Among the various claims, Antioch alleged that the Cahns breached their financial duty to Antioch by using law school funds to pay outside counsel. The trial court ruled against Antioch, finding that no such fiduciary duty existed. Antioch appealed.